Global Gas Market Overview: Situation Analysis

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Global gas prices, including those for Russian gas, are formed based on world gas and oil product prices.

Global gas markets have their key price benchmarks. There are several reference indices, two of which are primary:

1. American market (Henry Hub):

- Current price: Adjustment on Monday to $3.1 per million BTU (British Thermal Units).

2. European market (TTF):

- Current price: Increase to $610 per 1,000 cubic meters.

1. Henry Hub – American gas. This is a gas distribution hub in Louisiana, USA. The benchmark plays a leading role in setting natural gas prices in the US, traded on the New York Mercantile Exchange. The measurement unit is British Thermal Units (BTU). To convert the price to an equivalent of 1,000 cubic meters, a conversion factor of 35.8 is used. It is important to note that this price reflects the raw material cost without accounting for liquefaction, transportation, and regasification costs. Therefore, the end consumer in the US pays significantly more for gas.

2. TTF – European gas. This is the main benchmark for gas prices in Europe. TTF stands for Title Transfer Facility, a virtual gas trading platform.

It is worth noting that gas pricing mechanisms worldwide are diverse: they include exchange trading (competitive pricing, as on TTF in Europe), oil-indexation (linking gas prices to oil prices), regulated prices, and direct contracts where prices are determined by the balance of supply and demand, influencing global benchmarks including gas prices and the cost of alternative fuels (gas, oil, coal).

Russian gas prices, especially for export markets, have traditionally been heavily dependent on oil-indexation, but now are more oriented towards spot markets and competitive mechanisms, although the link to energy prices remains.

This overview was presented by Alexey Grishchenko, Doctor of Economics, Professor at the Department of Operations and Industry Management of the Faculty of "Higher School of Management" at the Financial University under the Government of the Russian Federation.